DNVGL.com uses cookies to give you the best possible experience on our site. By browsing the site you agree to our use of cookies. You can click “Close” to remove this message. For more information please visit our cookie information page.

View DNV GL headquarters

Breadcrumbs

Oil and gas industry to keep a tighter rein on capital expenditure in 2014

SHARE:

PRINT:

New report reveals optimism in the sector but caution over rising costs and oil prices.. Amid a positive outlook for the industry in 2014, senior oil and gas professionals have predicted that a deficit of skilled professionals will be the biggest barrier to the growth of their businesses in 2014, according to a research report released today by the leading technical advisor to the sector, DNV GL.

Robert Andrew Coveney

The industry’s dwindling pool of engineering talent has topped industry leaders’ list of professional concerns for a second year running; a trend that is driving up salaries to unprecedented levels in some areas. The median daily rate that respondents to DNV GL’s research admitted they are willing to pay individual contractors in technical areas with a particular expertise shortage is USD 1,000.

Challenging Climates: The outlook for the oil and gas industry in 2014 is an annual litmus test for industry sentiment in the year ahead. It has been produced with input from a survey of more than 430 oil and gas professionals and in-depth interviews with more than 20 industry executives.

Key findings include:

The overall outlook for 2014 is confident among industry professionals: around nine in 10 (88%) are optimistic about the outlook for 2014

However, 47% of respondents consider skills shortages as the top barrier to growth. This issue also topped the list in 2013

Globally, the positions that will be hardest to fill within the oil and gas industry are project managers (38%), who are most in demand in Asia Pacific (42%) where many of the world’s largest projects are located. Also in demand globally are offshore-related engineers (eg, marine, technical, operational, piping) (24%) and safety and risk engineers (16%)).

Skills shortages are most acute in North America (59%) given the rapid growth of shale oil and gas production there and the changing nature of projects.

Elisabeth Tørstad, CEO of DNV GL – Oil & Gas , says: “The sector is increasingly moving into challenging environments which require deep technical expertise to provide solutions, yet many companies are faced with an ongoing skills shortage. This need is driving up salaries at a time when there is already pressure to reduce costs. While technology can go some way to plugging the gap, it can’t fully replace human intervention.

“The industry needs to take a longer-term view of building professional skills, rather than putting the brakes on nurturing talent when the oil price weakens. While we cannot fully duplicate and replace the experience of retiring professionals in the sector, we can work smarter through structured approaches to managing industry knowledge and ensuring that the competence built is effectively transferred to younger generations.

“A more diverse approach to recruitment would also help to address the issue. The skills it takes to manage the construction of a space shuttle or hospital are not necessarily so dissimilar to what’s needed to manage the construction of an oil platform. And while decisions for global projects are today made in a few hubs around the world, I’m confident that we will employ a more geographically diverse working model in a few years. We will have a talent squeeze if we seek to duplicate the people in the industry today, but not if we are able to utilise the wider talent pool available to us.”

Greater consolidation
In response to rising costs, operators will seek to rely on larger supply chain partners which are more capable of providing a consistent global service, according to the report. About one in five (22%) survey respondents says that their company will increase its work with larger partners, compared with just 6% in 2012.

Furthermore, more than a third (37%) of operators say that their companies intend to acquire partners with the specialist knowledge and skills they need as they move into tougher exploration and production sites, with almost half (49%) saying they will need to increase alliances with others to share knowledge in order to cope with more challenging environments.

In turn, DNV GL’s research affirms that operators will focus on controlling risks and costs by seeking greater standardisation in their procurement approaches. This gives rise to greater interest in oil companies centralising, standardising and streamlining their supply chain to avoid costs in creating new solutions.

Future investment
The report also reveals that the US, Brazil and Australia are the top investment destinations for 2014, with larger operators seeking to expand into challenging new environments such as deepwater sites in East Africa and the Arctic.